According to RBI guidelines, all deposit-taking NBFCs would be mandated to obtain credit rating and also comply with Clause 49 of SEBI's listing agreement on induction of independent directors

Mumbai: Non Banking Financial Companies (NBFC) would need prior approval from the Reserve Bank of India (RBI) before making changes in their ownership control, a draft guideline of the central bank said, reports PTI.

The RBI's draft guidelines based on Usha Thorat Committee report also seek to make mandatory for all deposit-taking NBFCs to obtain credit rating.

Appointment of chief executives of NBFCs with asset size of Rs1,000 crore and above would require the RBI approval, it added.

"In the interest of good governance and the sensitivities associated with NBFCs...such companies, whether listed or not, will need to comply with Clause 49 of SEBI's listing agreement on corporate governance including induction of Independent Directors," the draft said.

The draft norms said existing unrated NBFCs-D will be given a period of one year to get rated, "thereafter, they would not be allowed to accept any fresh deposits or renew existing deposits, till they get themselves rated," it said.

On change in control or transfer of shareholding, the draft said that all registered NBFCs should take prior approval from the RBI where there is a change in control and increase of shareholding to the extent of 25 per cent by individuals or groups, directly or indirectly.

Regarding non-performing assets (NPAs), the RBI has proposed that asset classification and provisioning norms should be made similar to that of banks for all registered NBFCs irrespective of size.

At present, the period for classifying loans into NPAs in case of NBFCs is higher at 180/360 days compared to 90 days for banks.

The draft guidelines are based on recommendations made by the Working Group headed by former RBI Deputy Governor Usha Thorat. The panel was constituted to review the existing regulatory and supervisory framework of NBFCs.

The objectives of the Group were to address issues relating to regulatory arbitrage and systemic risk, so as to create a strong and resilient non-banking financial sector.

The draft further said it has been decided that Tier I capital be raised to 12% for all captive NBFCs and for NBFCs that are into lending or investment in sensitive sectors like capital market, commodities and real estate.

To address liquidity risk, it said all NBFCs should maintain high quality liquid assets. It has also proposed that henceforth NBFCs be classified under two categories -- exempted NBFCs and registered NBFCs.

All registered NBFCs would be under RBI regulation, while the RBI reserves the right to bring the other category under its regulation "should the need arise".

The RBI has sought stakeholder comments on the draft norms by 10 January 2013.

User

CII should go to the tier-II, tier-III towns and villages and tell why these reforms are good says the deputy governor of the RBI

Mumbai: Reserve Bank of India (RBI) Deputy Governor HR Khan has asked industry captains to talk to the masses about the need for economic reforms as pro-reform voices are a "limited constituency" in the country, reports PTI.

"There is a huge need for communication (as to) why reforms are necessary. It is not only to attract foreign investors...it is in the interest of the country," he said.

"There is a vested interest in the country against business. They think business is a crime. (They say) any reforms and people will suffer. But nobody explains, starting from the top political leadership to the captains of the industry, academia. Nobody goes and talks to the general people," he said.

Khan clarified that these are his personal opinions and not those of the RBI, which he said is the only central bank in the world which does the outreach programmes that take the top leadership to the hinterland to interact with the youth and general public.

"Captains of industry don't go to the villages and tell people that this is good for you," he said, speaking at a conference on capital markets organised by industry body CII.

"CII should go to the tier-II, tier-III towns and villages and tell why these reforms are good," he said, adding pro-reform voices are a "limited constituency".

Khan's comments come in the backdrop of government getting Parliament's nod for foreign investment in multi-brand retail and asserting its resolve to push ahead with other reform measures.